MPG Office Trust Reports Third Quarter 2012 Financial Results

MPG Office Trust Reports Third Quarter 2012 Financial Results

LOS ANGELES--(BUSINESS WIRE)-- MPG Office Trust, Inc. (NYS: MPG) , a Southern California-focused real estate investment trust, today reported results for the quarter ended September 30, 2012.

Significant Third Quarter Events

  • We had $158.6 million of cash as of September 30, 2012 (excluding restricted cash related to mortgages in default), of which $117.4 million was unrestricted and $41.2 million was restricted.

  • During third quarter 2012, we completed new leases and renewals for approximately 362,000 square feet, including our pro rata share of our joint venture properties. Included in that amount is the ten-year lease renewal with Wells Fargo Bank for approximately 291,000 square feet at the Wells Fargo Tower located in the Bunker Hill area of downtown Los Angeles. Wells Fargo has the option, exercisable over the next three years, to contract its office space by 89,000 square feet. Wells Fargo also has the option, exercisable over the next two years, to expand its office space by 25,000 square feet.

  • On July 9, 2012, we extended the maturity date of the mortgage loan secured by KPMG Tower for an additional one year, to October 9, 2013. In connection with the extension, we repaid $35.0 million of principal, which reduced the outstanding loan balance to $365.0 million. Additionally, we funded a $5.0 million leasing reserve and agreed to a full cash sweep of excess operating cash flow which began on September 9, 2012. Excess operating cash flow (cash flow after the funding of certain reserves, the payment of property operating expenses and the payment of debt service) is being applied to fund a $1.5 million capital expenditure reserve, to fund an additional $5.0 million into the leasing reserve, and thereafter, to reduce the outstanding principal balance of the loan. As of September 30, 2012, we have fully funded the capital expenditure reserve and have funded $0.6 million of the additional leasing reserve.

  • On July 12, 2012, we sold our interest in Stadium Gateway (a joint venture property in which we owned a 20% interest). We received net proceeds of approximately $1 million, including reimbursement of loan reserves.

  • During July 2012, Robert F. Maguire III and related entities redeemed a total of 5,176,251 noncontrolling common units of our Operating Partnership. At Mr. Maguire's request, we issued 4,494,220 shares of common stock in exchange for these units to a party not related to Mr. Maguire and 682,031 shares of common stock to Mr. Maguire directly. The redemption of these units and subsequent issuance of the common stock to a party not related to Mr. Maguire caused Robert F. Maguire III and related entities to fall below the 50% ownership requirement set forth in his contribution agreement. As a result, all tax indemnification obligations in favor of him and related entities, as well as all remaining limited partners, now expire on June 27, 2013. Therefore, pursuant to the terms of the contribution agreement, all restrictions on disposition relating to the following assets now expire on June 27, 2013: Gas Company Tower, US Bank Tower, KPMG Tower, Wells Fargo Tower and Plaza Las Fuentes.

  • On August 3, 2012, a trustee sale was held with respect to Glendale Center. As a result of the foreclosure, we were relieved of the obligation to repay the $125.0 million mortgage loan secured by the property as well as accrued contractual and default interest on the mortgage loan. In addition, we received a general release of claims under the loan documents pursuant to a previous in-place agreement with the special servicer.

  • On September 6, 2012, a trustee sale was held with respect to 500 Orange Tower. As a result of the foreclosure, we were relieved of the obligation to repay the $110.0 million mortgage loan secured by the property as well as accrued contractual and default interest on the mortgage loan. In addition, we received a general release of claims under the loan documents pursuant to a previous in-place agreement with the special servicer.


Subsequent Event

  • On October 1, 2012, a trustee sale was held with respect to Two California Plaza. As a result of the foreclosure, we were relieved of the obligation to repay the $470.0 million mortgage loan secured by the property as well as accrued contractual and default interest on the mortgage loan. In addition, we received a general release of claims under the loan documents pursuant to a previous in-place agreement with the special servicer.

Third Quarter 2012 Financial Results

Net income available to common stockholders for the quarter ended September 30, 2012 was $88.0 million, or $1.57 per share, compared to net income available to common stockholders of $25.6 million, or $0.51 per share, for the quarter ended September 30, 2011.

Our share of Funds from Operations (FFO) available to common stockholders for the quarter ended September 30, 2012 was $63.2 million, or $1.11 per diluted share, compared to $46.9 million, or $0.92 per diluted share, for the quarter ended September 30, 2011. Our share of FFO before specified items was $(6.2) million, or $(0.11) per share, for the quarter ended September 30, 2012 as compared to $(1.7) million, or $(0.04) per share, for the quarter ended September 30, 2011.

As of September 30, 2012, our office portfolio (excluding Properties in Default) was comprised of whole or partial interests in eight properties totaling approximately 7.9 million net rentable square feet, and on- and off-site structured parking plus surface parking totaling approximately 3.5 million square feet, which accommodates approximately 11,000 vehicles.

We will host a conference call and audio webcast, both open to the general public, at 8:00 a.m. Pacific Time (11:00 a.m. Eastern Time) on Tuesday, November 6, 2012, to discuss the financial results of the third quarter and provide a company update. The conference call can be accessed by dialing (855) 374-0037 (Domestic) or (706) 758-3042 (International), ID number 45325331. The live conference call can be accessed via audio webcast at the Investor Relations section of our website, located at www.mpgoffice.com, or through Thomson Reuters at www.earnings.com. Our Supplemental Operating and Financial Data package is available at the Investor Relations section of our website, located at www.mpgoffice.com under "Financial Reports-Quarterly & Other Reports."

A replay of the conference call will be available approximately two hours following the call through November 9, 2012. To access this replay, dial (855) 859-2056 (Domestic) or (404) 537-3406 (International). The required passcode for the replay is ID number 45325331. The replay can also be accessed via audio webcast at the Investor Relations section of our website, located at www.mpgoffice.com, or through Thomson Reuters at www.earnings.com.

About MPG Office Trust, Inc.

MPG Office Trust, Inc. is the largest owner and operator of Class A office properties in the Los Angeles Central Business District. MPG Office Trust, Inc. is a full-service real estate company with substantial in-house expertise and resources in property management, leasing and financing. For more information on MPG Office Trust, visit our website at www.mpgoffice.com.

Business Risks

This press release contains forward-looking statements based on current expectations, forecasts and assumptions that involve risks and uncertainties that could cause actual outcomes and results to differ materially. These risks and uncertainties include, without limitation: risks associated with our liquidity situation, including our failure to obtain additional capital or extend or refinance debt maturities; risks associated with our failure to reduce our significant level of indebtedness; risks associated with the timing and consequences of loan defaults and non-core asset dispositions; risks associated with our loan modification and asset disposition efforts, including potential tax ramifications; risks associated with our ability to dispose of properties with potential value above the debt, if and when we decide to do so, at prices or terms set by or acceptable to us; general risks affecting the real estate industry (including, without limitation, the inability to enter into or renew leases at favorable rates, dependence on tenants' financial condition, and competition from other developers, owners and operators of real estate); risks associated with the continued disruption of credit markets or a global economic slowdown; risks associated with the potential loss of key personnel (most importantly, members of senior management); risks associated with joint ventures; risks associated with our failure to maintain our status as a REIT under the Internal Revenue Code of 1986, as amended, and possible adverse changes in tax and environmental laws; and potential liability for uninsured losses and environmental contamination.

For a further list and description of such risks and uncertainties, see our Annual Report on Form 10-K filed on March 15, 2012 with the Securities and Exchange Commission. The Company does not update forward-looking statements and disclaims any intention or obligation to update or revise them, whether as a result of new information, future events or otherwise.

MPG OFFICE TRUST, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts)

September 30, 2012

December 31, 2011

(Unaudited)

ASSETS

Investments in real estate

$

2,168,111

$

2,586,980

Less: accumulated depreciation

(615,216

)

(659,408

)

Investments in real estate, net

1,552,895

1,927,572

Cash and cash equivalents

117,372

117,969

Restricted cash

72,978

74,387

Rents and other receivables, net

3,402

4,796

Deferred rents

51,251

54,663

Deferred leasing costs and value of in-place leases, net

56,761

71,696

Deferred loan costs, net

7,605

10,056

Other assets

4,920

7,252

Assets associated with real estate held for sale

14,000

Total assets

$

1,867,184

$

2,282,391

LIABILITIES AND DEFICIT

Liabilities:

Mortgage loans

$

2,464,084

$

3,045,995

Accounts payable and other liabilities

110,524

140,212

Excess distributions received from unconsolidated joint venture

7,700

Acquired below-market leases, net

14,037

24,110

Total liabilities

2,596,345

3,210,317

Deficit:

Stockholders' Deficit:

7.625% Series A Cumulative Redeemable Preferred Stock,

$0.01 par value, $25.00 liquidation preference, 50,000,000 shares
authorized; 9,730,370 shares issued and outstanding

as of September 30, 2012 and December 31, 2011

97

97

Common stock, $0.01 par value, 100,000,000 shares authorized;
57,120,182 and 50,752,941 shares issued and outstanding

as of September 30, 2012 and December 31, 2011, respectively

571

508

Additional paid-in capital

608,056

703,436

Accumulated deficit and dividends

(1,331,513

)

(1,504,759

)

Accumulated other comprehensive income (loss)

707

(15,166

)

Total stockholders' deficit

(722,082

)

(815,884

)

Noncontrolling Interests:

Accumulated deficit and dividends

(7,079

)

(118,049

)

Accumulated other comprehensive income

6,007

Total noncontrolling interests

(7,079

)

(112,042

)

Total deficit

(729,161

)

(927,926

)

Total liabilities and deficit

$

1,867,184

$

2,282,391

MPG OFFICE TRUST, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited; in thousands, except share and per share amounts)

For the Three Months Ended

For the Nine Months Ended

Sept. 30, 2012

Sept. 30, 2011

Sept. 30, 2012

Sept. 30, 2011

Revenue:

Rental

$

38,352

$

41,149

$

113,851

$

123,879

Tenant reimbursements

19,707

20,532

57,542

60,148

Parking

7,725

8,195

24,027

24,395

Management, leasing and development services

414

2,590

2,196

4,715

Interest and other

1,481

580

15,794

2,504

Total revenue

67,679

73,046

213,410

215,641

Expenses:

Rental property operating and maintenance

19,178

17,436

52,968

51,075

Real estate taxes

6,439

6,528

18,539

18,949

Parking

2,013

2,074

6,135

6,524

General and administrative

5,861

5,258

17,721

17,257

Other expense

1,831

1,794

6,081

5,086

Depreciation and amortization

19,100

20,958

57,610

61,014

Impairment of long-lived assets

2,121

Interest

40,733

42,845

126,767

124,985

Loss from early extinguishment of debt

164

Total expenses

95,155

96,893

287,942

285,054

Loss from continuing operations before equity in

net income (loss) of unconsolidated joint venture

(27,476

)

(23,847

)

(74,532

)

(69,413

)

Equity in net income (loss) of unconsolidated joint venture

38

204

14,312

(129

)

Loss from continuing operations

(27,438

)

(23,643

)

(60,220

)

(69,542

)

Discontinued Operations:

Loss from discontinued operations before gains on

settlement of debt and sale of real estate

(2,419

)

(18,736

)

(15,826

)

(65,629

)

Gains on settlement of debt

79,383

62,531

194,986

190,380

Gains on sale of real estate

45,483

10,215

66,707

73,844

Income from discontinued operations

122,447

54,010

245,867

198,595

Net income

95,009

30,367

185,647

129,053

Net (income) attributable to noncontrolling
common units of our Operating Partnership

(2,373

)

(2,915

)

(11,252

)

(13,193

)

Net income attributable to MPG Office Trust, Inc.

92,636

27,452

174,395

115,860

Preferred stock dividends

(4,637

)

(4,637

)

(13,912

)

(14,169

)

Preferred stock redemption discount

2,780

2,780

Net income available to common stockholders

$

87,999

$

25,595

$

160,483

$

104,471

Basic income per common share:

Loss from continuing operations

$

(0.56

)

$

(0.45

)

$

(1.30

)

$

(1.45

)

Income from discontinued operations

2.13

0.96

4.34

3.57

Net income available to

common stockholders per share

$

1.57

$

0.51

$

3.04

$

2.12

Weighted average number of common shares outstanding

56,118,506

49,961,007

52,831,545

49,342,879

Amounts attributable to MPG Office Trust, Inc.:

Loss from continuing operations

$

(26,596

)

$

(20,439

)

$

(54,779

)

$

(59,910

)

Income from discontinued operations

119,232

47,891

229,174

175,770